Jack in the Box (JACK)

Q1 2011 Earnings Call

February 24, 2011 11:30 am ET

Executives

Jerry Rebel - Chief Financial Officer, Principal Accounting Officer and Executive Vice President

Linda Lang - Chairman, Chief Executive Officer, President and Chairman of Executive Committee

Carol DiRaimo - Vice President of Investor Relations & Corporate Communications

Analysts

Keith Siegner - Crédit Suisse AG

Matthew Van Vliet

Larry Miller - RBC Capital Markets, LLC

Matthew DiFrisco - Oppenheimer & Co. Inc.

John Glass - Morgan Stanley

Christopher O'Cull - SunTrust Robinson Humphrey, Inc.

Jonathan Komp - Robert W. Baird

Jake Bartlett - Oppenheimer

Paul Westra - Cowen and Company, LLC

Jeffrey Bernstein - Barclays Capital

Joseph Buckley - BofA Merrill Lynch

Jason Belcher - Wachovia Securities

Presentation

Operator

Compare to:
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Good day, everyone, and welcome to the Jack in the Box Inc. First Quarter Fiscal 2011 Earnings Conference Call. [Operator Instructions] At this time, for opening remarks and introductions, I would like to turn the call over to Carol DiRaimo, Vice President of Investor Relations and Corporate Communications for Jack in the Box. Please go ahead.

Carol DiRaimo

Thank you, and good morning, everyone. Joining me on the call today are our Chairman, CEO and President, Linda Lang; Executive Vice President and CFO, Jerry Rebel; and Executive Vice President and Chief Operating Officer, Lenny Comma.

During this morning session, we'll review the company's operating results for the first quarter of fiscal 2011 and update our guidance for the year. Following today's presentation, we'll take questions from the financial community.

Please be advised that during the course of our presentation and our question and answer session today, we may make forward-looking statements that reflects management's expectations for the future, which are based on current information. Actual results may differ materially from these expectations based on risks to the business.

The Safe Harbor statement in yesterday’s news release and the cautionary statement in the company’s most recent Form 10-K are considered a part of this conference call. Material risk factors, as well as information relating to company operations, are detailed in our most recent 10-K, 10-Q and other public documents filed with the SEC. These documents are available on the Investors section of our website at www.jackinthebox.com.

A few calendar items to note, Jack in the Box management will be participating in RBC Capital Markets' Restaurant and Leisure Investor Day in Park City, Utah, on March 3, the Bank of America and Merryll Lynch Consumer Conference in New York on March 10, the JPMorgan Gaming and Lodging and Restaurant & Leisure Management Access Forum in Las Vegas on March 29 and the Morgan Stanley Retail Field Trip in Phoenix on March 30. Our second quarter ends on April the 17th, and we tentatively expect to announce results the week of May 16. With that, I'll turn the call over to Linda.

Linda Lang

Thank you, Carol, and good morning, everyone. Our number one priority this year is to drive sales and traffic at Jack in the Box by improving the guest experience, and our results are beginning to reflect our efforts. The sequential improvement in sales trends that we saw in our fourth quarter continued through the first quarter of 2011, with same store sales at Jack in the Box company restaurants increasing 1.5%. This increase was driven primarily by transaction growth as the entire 550 basis point improvement in sales versus the fourth quarter was driven by traffic.

Our two biggest markets, California and Texas, both have positive same-store sales. And California was again our best performing market during the quarter. It's also worth noting that same store sales in Arizona turned positive for the quarter.

Same-store sales at Jack in the Box franchise restaurants were also positive, up 9/10 of a percent in the quarter. We believe the investments we've made to improve the overall guest experience at our restaurants are beginning to resonate with our guests. According to NPD data since July of last year, the gap between our system same-store sales performance versus the QSR sandwich segment has steadily narrowed, and in recent weeks, has nearly closed. Let me review what we've been doing internally to drive this improvement.

We continue to execute a comprehensive systemwide programs that we began in the fourth quarter to improve the service we provide our guests. As we've said previously, along with evaluating restaurant performance through our Voice of the Guest surveys, additional resources are being committed to more closely measure how restaurants are executing the key drivers of guest satisfaction. As for enhancing our restaurant facilities, we're on pace to substantially complete our restaurant reimage program systemwide by the end of this year. At quarter end, 73% of company restaurants and more than 61% of the Jack in the Box system featured all interior and exterior elements of the reimage program.

Concurrent with the execution of these initiatives, our R&D and menu marketing teams have been making noticeable quality improvements to several of our core products to re-engage lapsed customers and create an even broader appeal for these guest favorites. We've talked about the improvements we've made over the last several months to our coffee, french fries, bacon and tacos. And order incidents has increased on all of these core items since the improvements were made. There are still more improvements to come, and we'll be communicating these enhancements in our promotional messaging to make our guest aware of the changes.

In addition to improving our core menu items, we're continuing to execute a marketing strategy that emphasizes both premium products and value messages. The first quarter featured the conclusion of a limited time promotion, the Pastrami Grilled Sandwich on Artisan bread. Our premium grilled sandwich platform will continue to be used to launch other new products.

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